A competitive equilibrium may preserve, even magnify, firm-specific risks in the aggregate. This is the case if firms can anticipate their productivites when they make investment decisions or, alternatively, if capital can be reallocated once the productivites of firms are realized. In a large...

When the asset market is incomplete, equilibrium allocations are not invariant to changes in the financial policies of firms: in the presence of secondary assets, such as options, whose payoffs depend nonlinearly on the price of equity, the range of attainable reallocations of revenue varies as...

When the asset market is incomplete, and assets are traded at an initial contracting period, competitive equilibria may fail to exist. This may occur in a robust economy with asset payoffs denominated in a numeraire commodity. Restrictions on the asset structure guarantee the existence of...